Tobacco
Settlement Agreement Fund Oversight Committee

Minutes

<MeetMDY1>April 15, 2009

The<MeetNo2>2nd meeting of the Tobacco Settlement
Agreement Fund Oversight Committee was held on<Day>Wednesday,<MeetMDY2>April
15, 2009, at<MeetTime>10:00 AM, in<Room>Room 129 of the Capitol Annex. Senator
Carroll Gibson, Chair, called the meeting to order, and the secretary called
the roll.

Representative Charlie Hoffman nominated Representative
Dottie Sims for House Co-chair; seconded by Representative Tom McKee. Representative
Tommy Turner moved that nominations cease and that Representative Sims be
elected by acclamation; seconded by Representative Royce Adams. Upon voice vote,
and without objection, Representative Dottie Sims was elected as House Co-chair.

Senator Charlie Borders nominated Senator Carroll Gibson for
Senate Co-chair, seconded by Senator Joey Pendleton. Senator Pendleton moved
that nominations cease and that Senator Gibson be elected by acclamation; seconded
by Senator Charlie Borders. Upon voice vote, and without objection, Senator
Carroll Gibson was elected as Senate Co-chair.

The January 8, 2009 minutes were approved, by voice vote and
without objection, on a motion made by Representative Sims and seconded by
Representative Adams.

The committee first heard from Todd Harp, Senior Project
Analyst, Governor’s Office of Agricultural Policy (GOAP), who summarized the
revisions contained in the 2009 Agricultural Development Board (ADB) policy document.
He stated that the revisions included consolidating model programs into one
program now called the “County Agriculture Investment Program” (CAIP). He went
on to explain the 11 provisions under the CAIP.

Mr. Harp noted that, unlike before, each investment area
would be available in every county. As he summarized the policy revisions, Mr.
Harp noted one change – the lack of “tobacco dependency” will not render a
producer ineligible for program participation.

Responding to Representative McKee, Mr. Harp indicated that
county councils will be able to strengthen the new policies, or make them more
restrictive, with the exception of the tobacco dependency policy. According to
Mr. Harp, a uniform scoring system to be used by county councils in judging
applications would award points to those who had past or current involvement in
tobacco production.

Mr. Harp also pointed out other provisions: an annual
cost-share limit will be implemented in 2009; the ADB may require significant
contributions of county Agricultural Development Fund moneys for projects;
collaboration projects involving multiple counties and pooling of funds will be
given greater consideration; and the ADB, the Auditor of Public Accounts and
other relevant state agencies may review all project records.

Referring to the tobacco dependency requirement, Senator
Borders indicated the intent of the Agricultural Development Fund was to help
farmers in the state who had once produced tobacco. The senator expressed a
hope that they would not begin seeing more non-tobacco dependent applications receiving
the funds.

Roger Thomas, GOAP Executive Director, stated that the
provision specifically would provide broader access, particularly to young
farmers. He mentioned the points given to tobacco farmers on the scoring sheet.

During on-going discussion, Co-chair Gibson asked how moneys
would be divided between counties that collaborate on projects, such as
regional farmers’ markets. Mr. Harp mentioned a regional farmers’ market
project funded last year. That project received funds from its home county and
surrounding counties, based on producer representation. According to Mr. Harp,
the board would review regional projects from the standpoint of the extent that
counties participate. According to Mr. Thomas, the board also looks at the
level of local participation as an adjunct to county council participation.

Representative McKee stated that all the revisions are good,
but asked that the agency, during some upcoming regional workshops, stress to
the councils how important they are and that their list of priorities will be
considered as usual.

Mr. Rogers discussed the addition of a new investment option
– On-farm Energy Efficiency and Production Investment Area. He said the goals
of this program would be to increase producer awareness in improving energy
efficiency; to offer financial incentives to encourage farmers to adopt new
technologies; and to assist with the costs of hiring technical expertise in
applying for grant programs.

Mr. Michael Judge, Director of Operations, briefed the
committee on a new Deceased Farm Animal Disposal Assistance Program, which was
developed in consultation with the Kentucky Division of Conservation. He said
the program would serve as an interim measure to facilitate the coordination of
environmentally sound and cost effective disposal of dead livestock. The county
Agricultural Development Councils will have the opportunity to commit a portion
of their local funds to an approved program within their country.

Representative Adams asked if officials in Washington were
willing to delay the implementation of the Food and Drug Administration
regulation affecting the use of livestock materials in all animal feed. Mr.
Thomas indicated that the implementation of regulation would be effective on
June 26, and there is no way to stop it. According to Representative Adams, the
final implementation of the federal regulation will make the new state program
even more important.

As discussion continued, Co-chair Sims asked if the county councils
received information regarding the policy revisions. Mr. Thomas stated that the
councils did receive information, and the information also could be found on
GOAP website.

Joel Neaveill, GOAP Chief of Staff, discussed the funding
decisions by GOAP for January 2009, while Mr. Judge summarized the February
2009 project reports.

At one point, Co-chair Gibson asked if there was a notable
decline in dairy operations. Mr. Thomas stated that there was a decline.

Responding to Co-chair Sims, the GOAP officials explained
the new state project application review process, which has the board reviewing
state project applications during one monthly meeting, then considering the
applications during the next month’s meeting. CAIP applications will be reviewed
at every monthly ADB meeting.

In looking at a chart showing projects funding through the
years, Representative Adams asked what happens to those applicants who do not
meet their obligations under forgivable loan arrangements. Mr. Thomas responded
that those who do not achieve their forgiveness obligations must repay the
remaining portion of the loan. According to Mr. Neaveill, the board has
generally moved away from forgivable loans, partly because they are difficult
to track and it is difficult to make the loan procedure uniform.

Sen. Gibson stated that due to the shortness of the hour,
that Mr. Tom Keene with the University of Kentucky agreed to delay this
presentation until the next meeting of the committee.

Documents distributed during the committee meeting are
available with meeting materials in the LRC Library. The meeting adjourned at
approximately 11:45 a.m.